Bill McBride at
Calculated Risk has two must-read paragraphs on the so-called
Fiscal Cliff:

My baseline forecast assumes a compromise on the fiscal slope
(more of a "slope" than a "cliff", and January 1st is not a drop
dead date). My current guess is an agreement will be reached
AFTER January 1st - so that the Bush tax cuts can expire and
certain politicians can claim they didn't vote to raise taxes
(silly, but that is politics).

I expect the relief from the Alternative Minimum Tax (AMT) will
be extended, the tax cuts for low to middle income families will
be reenacted, and that most, but not all, of the defense spending
cuts will be reversed (aka "sequestration"). However I think the
payroll tax cut will probably not be extended, and tax rates on
high income earners will increase a few percentage points to the
Clinton era levels.

This is a very sensible, and important antidote to some of the
Cliff hysteria that's permeated the media.

January 1 isn't a drop dead date. Later in the Spring there's a
debt ceiling hike that has to happen, and that's more of a hard
deadline, but it's not the end of the world if the tax and
sequestration issues aren't dealt with in the next few weeks. Not
only is there no 'bang' event on January 1, but letting the tax
rates jump is a way for politicians to then vote to lower them,
which is easier.

It would not be good to let everything expire permanently, as
that would be a shock austerity that we don't need, but it's not
a hit/not-hit scenario. Given the seriousness of the issues,
better to not try to do a rush job in the middle of a
media-induced, post-election fever.